# Reece Corporation is considering the purchase of a machine that would cost $24,388 and would have...

## Question:

Reece Corporation is considering the purchase of a machine that would cost $24,388 and would have a useful life of 6 years. The machine would generate $5,600 of net annual cash inflows per year for each of the 6 years of its life.

The internal rate of return on the machine would be closest to which of the following?

a. 10%

b. 6%

c. 12%.

d. 8%.

## Internal Rate of Return Method:

The internal rate of return method is a capital budgeting technique which yields the rate of return generated on an investment by means of net cash inflows which are expected to occur during the useful life. Other capital budgeting techniques which may be used are net present value method, cash payback period etc.

## Answer and Explanation: 1

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View this answerThe calculated value of the internal rate of return for the given investment is 10%.

The internal rate of return (*r%*) can be determined by equating...

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Chapter 14 / Lesson 7Discover what the internal rate of return is. Learn its importance and uses. Review its formula and learn how to calculate it through the given examples.

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